Foreclosure Buyers Respond to COVID-19

The Auction.com Q2 2020 Foreclosure Buyer Insights report is based on two surveys, each sent to more than 9,000 buyers before and during the pandemic.

Auction.com has just published its Q2 2020 Foreclosure Buyer Insights report, which sheds light on how real estate investors on the frontlines of the housing market are responding to the COVID-19 pandemic and ensuing market turmoil. Here are some high-level findings:

• 61 percent of investors now say online auctions are their top source for finding inventory compared to just 29 percent back in February, before the pandemic.
• Single-family rental investors and small-volume investors (five or fewer purchases per year) are most optimistic in their outlook, with more than half of each of those categories planning to still increase or keep property acquisitions the same despite the pandemic.
• Meanwhile, larger-volume investors (6 to 20 purchases a year and more than 20 purchases a year) are about twice as likely as smaller-volume investors to expect home prices to decline in 2020.

The report pulls data from two surveys sent to more than 9,000 Auction.com buyers: one survey in February before the pandemic declaration; and a second survey in April, after the pandemic declaration. This chart shows respondents’ most preferred property acquisition method:

FORECLOSURE BUYERS MOVING ONLINE IN WAKE OF COVID-19 CRISIS

•  Online auctions now top acquisition strategy with rising interest in remote bidding technology for live auctions
• Most hold-as-rental buyers, small-volume buyers and online auction buyers plan increase or no change in property acquisitions in 2020
• 14 percent of buyers expect flat or declining home prices in 2020, up from 7 percent in 2019

“Most foreclosure buyers are small-volume investors purchasing fewer than five properties a year, and more than 90 percent of them are either selling to owner-occupants or holding the properties as rentals,” said Jason Allnutt, CEO at Auction.com. “This broad base of buyers is proving resilient even in the midst of market turmoil, leveraging the power of online auctions even as other sources of inventory are on the decline.”

The survey also asked: How Much Home Price Appreciation Do You Expect in Your Markets in 2020? Here are the results:

More High-Level Findings from the Survey:

• 76 percent of buyers bought five or fewer properties in 2019
• A growing majority of buyers ranked rehabbing and reselling to owner-occupants as their preferred investing strategy.
• One-third of buyers ranked hold-as-rental as their preferred investing strategy
• More than 80 percent of both rehab-and-resell and hold-as-rental buyers budget at least 10 percent of a property’s purchase price for rehab costs.

Auction.com is the nation’s largest online real estate transaction marketplace focused exclusively on the sale of bank-owned and foreclosure properties. The company brings a breadth of quality assets to the market, attracting prospective buyers through world-class marketing and leveraging a scalable technology platform to conduct transactions in a transparent, efficient manner. Auction.com is a Thomas H. Lee Partners company and is headquartered in Irvine, California, with offices in Silicon Valley, California, and Plano, Texas. Investors include CapitalG (formerly Google Capital) and Stone Point Capital.